Sequestration in Scotland
Sequestration is the Scottish term for Bankruptcy. The process of Sequestration in Scotland was modernised in 2008, again in November 2010 and again in April 2015. These changes have made Sequestration a viable debt relief solution for individuals in financial distress, and access to Sequestration is now available to anyone unable to pay their debts as they fall due. Sequestration is one of a suite of options available through WB Debtcare to someone in financial distress – our advisors can provide you with details of all the options available to enable you to make an informed choice of how to proceed. A consultation can be arranged at a time to suit you, in person at a convenient location, or by telephone. To arrange a free consultation, simply telephone 0141 566 7038.
What is a Sequestration?Once you have successfully applied for your sequestration, a Trustee is appointed to deal with your estate. Your estate means all the money that you owe, and any assets that you have. Following your sequestration, the companies and banks that are owed money (your creditors) must deal with your Trustee. They are no longer allowed to pursue you or take action against you in respect of the money owed. Your Trustee’s responsibility is to realise assets and assess if you are able to afford to make a contribution from your income for a period of four years. Your Trustee will divide up the monies ingathered equally amongst your creditors, and they must write off the balance that they do not receive. There is no legal requirement as part of the sequestration for your creditors to receive any payment. Sometimes they receive nothing. If your estate does not have sufficient funds to enable any payment to be made to your creditors, then they will legally have to write off all of what you owe to them. The legislation that allows this to happen is all contained within the Bankruptcy (Scotland) Act 1985.
Which of my assets would my Trustee have to deal with?The following is a list of the most typical assets we come across, and an indication as to how generally they will be dealt with:
|Asset Type||Included in Sequestration?|
|My Rented Home||No|
|The House I own (with no equity)||No|
|The House I own (with equity)||The equity only|
|My car valued over £3,000||Yes|
|My car with finance on it||Only what it’s worth over the finance level|
|My car valued at less than £3,000||No|
|My Personal Pension Plan||No|
|My Endowment Insurance Policy||Yes|
|Typical Household contents||No|
|Shares & Investments||Yes|
|Time Shares/Foreign Property||Yes|
|Money owed to me||Yes|
How will my Trustee deal with my assets, particularly my house and car?It is important to note that your trustee does not have to deal with your rented property, or your home if there is no equity (you owe more on the mortgage than the house is worth). Where there is equity in your property, it is only that equity that the trustee has an interest in. Where there is an asset that the Trustee must deal with, the asset does not necessarily have to be sold (though can be). For example a third party you propose (e.g. a family member, friend, or relative) may “buy out” the Trustee’s interest in the asset, or you may buy this out after your 1 year discharge. A “buy-out” may be by instalments over an agreed repayment period. This is most commonly how any interest in the equity in your home, or your car would be dealt with. Most other assets are generally sold. It is important that you have an understanding of how any assets you have will be dealt with before you commit to entering into a Sequestration. A WB Debtcare advisor can guide you in this regard.
How do I apply for Sequestration?You apply for Sequestration by completing an application form and submitting this to the office of the Accountant in Bankruptcy. This is a Scottish Government office based in Kilwinning. If you choose to have a Trustee from WB Debtcare deal with your Sequestration, we will assist with your application. The qualifying criteria is that you must owe at least £1,500 in total, and one of the following must apply:
- A qualified individual certifies that you are unable to pay your debts as they fall due (WB Debtcare Insolvency Practitioners are qualified to do this).
- You owe more than £17,000, a money advisor has assessed your income and expenditure using the Common Financial Tool and you have no surplus to pay a debtor’s contribution, don’t own single asset over £1,000. This is the Minimal asset Process “MAP” route to Sequestration.
- Creditors have taken certain court action out against you.
- WB Debtcare can take care of the process of certifying that you are unable to pay your debts as they fall due and submit your application.
Why is it best to have a WB Debtcare Trustee deal with my Sequestration?You have the option of nominating either the Accountant In Bankruptcy to act as your Trustee, or a private Licensed Insolvency Practitioner (such as the WB Debtcare Insolvency Practitioners). Unlike nominating the Accountant in Bankruptcy, if you nominate WB Debtcare then you will be able to discuss your problems before making a final decision, and do this with the person who will be dealing with your case. This enables you to understand beforehand how much of a payment for four years will be expected from your income, and agree how any assets you have will be dealt with. At WB Debtcare we have been delivering debt solutions for over 30 years and undertake Sequestrations on behalf of the Scottish Government. Accordingly, we are best placed to ensure that your Sequestration is conducted in accordance with the modern standard. WB Debtcare Insolvency Practitioners can act for you where you owe at least £6,000, and are in employment with scope for some surplus income (or have assets in your estate).
I am working – how much of my income will I have to pay over, and for how long?You will be assessed according to your own unique circumstances and by using the Common Financial Tool. Sequestration is aimed at providing debt relief and accordingly you will be returned to a better financial standing than the position you were in when paying back what you owe. If you are unable to make any payments from your income and have no assets then we will direct you to the Accountant in Bankruptcy to deal with your Sequestration. The payments you make from your income will be for no more than four years.
What can’t I do during my Sequestration?You will generally be discharged from your Sequestration after one year, though your Trustee will still be there to deal with your income payments for the three year period. During that one year prior to your discharge, there are certain restrictions on you. These are some of the main ones:
- You are limited to what further credit you can take on.
- You may not act as a Director of a limited company.
- You may not take on certain public offices.
- If you acquire any assets (e.g. an inheritance or lottery win) then these must go to your Trustee).